Richard Croucher explains how to develop a marketing strategy
A marketing strategy can be an incredibly detailed subject. Three of the books I have on this subject are over 800 pages each, but the fundamentals are always the same.
The purpose of a clear marketing strategy is to make the best use of the organisation's resources to maximise the potential opportunity to the organisation. This must be developed with consideration of the current and future competitive environment.
This introduces another important aspect of strategy, which is that it generally extends into a longer-time frame than most other aspects of running a business.
This is an important element and it is easy to lose sight of this. It is crucial to understand the distinction between strategy and tactics.
There are long definitions for both of these, but a simple definition to keep in mind is that strategy is about where we are going, while tactics are about how we are going to get there. It's like thinking about where you want to live, rather than thinking about how you're going to move all your stuff.
The approach to developing a marketing strategy should be rigorous and structured, incorporating approaches that challenge existing thinking and stimulate new ideas.
There are numerous marketing models to help identify potential strategies .
One of the standard approaches to help identify the right strategy is the SWOT (strengths, weaknesses, opportunities, threats) analysis. While this can seem a bit methodical it is a useful 'catch-all' exercise and helps direct thinking towards new areas. This can be applied at an overall organisational level or for a specific business unit, product line or market.
As well as setting the scene and encouraging an external perspective it can generate some immediate areas for strategic development.
Identified strengths can be developed to potentially provide a competitive advantage. Weaknesses can be addressed directly, or a strategy adopted which minimises their impact. Opportunities can be evaluated, prioritised based on attractiveness and likelihood of success, then matched against strengths to drive new strategic directions. And threats can be assessed based on seriousness and probability and can be either mitigated, or even potentially converted into opportunities.
In performing this analysis the general guidance is that strengths and weaknesses are internal factors, whilet threats and opportunities relate to the external market.
To identify the threats and weaknesses a useful checklist is the PLESTER model - the initials stand for:
These are the factors that drive change in the external environment, creating the opportunities and threats that the company must respond to. The long-term trend has been towards markets that evolve in increasingly unpredictable ways, but it's still worth doing this analysis to at least understand the predictable developments. This gives the organisation a better chance of dealing with unpredictable changes when they happen.
To understand how best to develop products and services within the overall market, a useful tool is the Ansoff matrix.
This matrix generates the following four combinations and resultant strategies that should be evaluated individually:
•Existing product/service into existing market - market penetration. This might lead to an increased focus on specific customer groups
•Existing product/service into new market - market extension. This might lead to expansion into a new geographical area, new segment or new channel
•New product/service into existing market - service development. This could be an internal development or using a third-party product or service
•New product/service into new market - diversification. The most risky approach so should be considered carefully, but not avoided if this is where the long-term future opportunity lies.
At a product/market level the Boston Consultancy Group growth share matrix is a useful tool to identify the products/markets on which to focus.
This matrix assesses products based on market growth and the company's relative market share (relative to largest competitor). There are four categories:
• Dogs - low market growth, low market share. No investment should be made in this area
• Cash Cow - low market growth, high market share. These should be harvested, as they generate a positive cash return
• Stars - high market growth, high market share. The growth in this area should be supported by the return generated from the cash cows
• Question marks (or problem children) - high market growth, low market share. These present an opportunity to cash in on a growing market. They are expensive to develop and may not all build sufficient market share to be successful.
It is useful to understand where existing products and services (such as motor, home, D&O or risk management) sit. An equally important aspect is the need to develop a balanced portfolio; in much the same way as is recommended for personal finances.
It is not possible for any company to pursue all the possible strategies open to it. So, having used some of the above models to stimulate thought about strategic alternatives, it is necessary to prioritise the strategies that will be pursued. There are a number of key questions to ask:
•Which are realistic?
•How risky is the strategy?
•How long will it take to develop?
•Which will provide the best return?
•Which strategy supports the overall objectives of the business?
•How does it fit with the organisation's long-term plans?
•Which organisations are likely to pursue similar strategies?
•Can the organisation retain a long-term competitive advantage?
•Do the selected strategies cover a variety of time horizons?
Having selected the preferred strategies it is essential to develop these, through a structured process, into formal marketing plans which detail the tactics used to deliver the strategies.
Both these plans and the underlying strategies must be regularly reviewed to ensure they continue to deliver the best returns for the organisation. IT
Richard Croucher is head of marketing at Broker Network